LOCKPORT – Some Lockport residents have wondered why the city almost ran out of money last year.
The reason, according to Finance Director Scott A. Schrader: They lost it and they forgot they had it.
“We have $800,000 of money we borrowed that we never spent,” Schrader, who joined the city March 30, told the Common Council on Wednesday.
The money was borrowed as long ago as 2012 for capital projects, which are major purchases and construction projects.
Schrader said the city appropriated about $500,000 from the general fund balance – otherwise known as the surplus – to pay for many of the projects for which it already had borrowed.
When the city’s fund balance disappeared, the city had to fall back on emergency borrowing in October 2013. But in 2014, the city’s cash flow crunch led to layoffs, especially in the fire department; the abolition of city ambulance service; and the borrowing of $4.6 million to pay off accumulated deficits.
Schrader told the aldermen, “Had we used the money we borrowed, we might not have been in the cash situation we had and could have avoided deficit financing.”
The “improper posting” of $724,000 was corrected by a Council resolution Wednesday, which shifted the borrowed money into operating funds, where it can be used for paying off debt.
“We’re paying interest on money we’ve not used,” Schrader said.
Asked who was to blame for what he called “a significant oversight,” Schrader said, “I would say it was a combination of the treasurer, the chief accountant and the department heads. I’d say primarily the chief accountant.”
That was Ruth E. Ohol, who retired at the end of 2014.
She was replaced Monday, after an eight-month vacancy in the $52,000-a-year job, by Cynthia L. Schilling.
Schilling is an Akron resident who obtained a waiver of the city’s residency policy from the Council on Wednesday. Schrader said he interviewed five people, including three from the county civil service list. There was only one applicant who lived in Lockport, and Mayor Anne E. McCaffrey said that person lacked the necessary qualifications.
Schilling will have to take a civil service examination and finish in the top three to keep the job. Alderwoman Anita Mullane, D-2nd Ward, voted against the residency waiver.
Treasurer Michael E. White said Schrader apologized to him for not telling him about the Schilling appointment.
“How’d you like to be the CFO of the city and not know they hired a chief accountant?” White asked.
As for Schrader’s report on how the city has responded to state and private audits that emphasized its poor accounting records, White said, “I don’t believe we should have jumped into deficit financing. I think the mayor was premature in doing so and jumping into a negotiated sale” of the bonds.
The city ran a deficit in all of its operating funds in 2013, but Schrader said all funds except water were in the black for 2014.
He said one of the city’s major errors was raiding the health reimbursement accounts of employees to make ends meet in October 2013. The $200,000 was paid back in 2014.
“That will never happen again,” Schader vowed.
But the “scariest” finding in any of the four audits of the city’s books in the past two years, Schrader said, was the conclusion by the Bonadio Group of Amherst that the city was simply making things up on its bank reconciliations.
They “have simply been made to mathematically work. In several cases, cash was artificially inflated in a fund and did not reflect the actual cash position,” the 2014 Bonadio report said.
White said that Schrader visited his office a few days ago. “He said I was not responsible for what happened to the city,” White said.
Asked if that anecdote was accurate, Schrader said, “Not completely. I said he was not solely responsible.”